Rising inflation, foreclosure laws top mortgage sector challenges in 2016

Besides other macro-economic issues whose combined impact brought Nigerian economy on its knees, rising inflation and foreclosure laws topped the list of challenges faced by the mortgage sector and its operators in the out gone year.

Whereas inflation rose to 18.6 percent in September, up from 13.8 percent in March, liquidity issues which have been a limiting factor in the growth of the sector remained unabated as new funds could not come into the sector due to palpable fear of default, more so with the economic situation which has led to reduced industrial productivity and job losses.

By way of definition, foreclosure is a legal process in which a lender attempts to recover the balance of a loan from a borrower, who has stopped making payments to the lender, by forcing the sale of the asset used as the collateral for the loan. Formally, a mortgage lender (mortgagee), or other lien-holder, obtains a termination of a mortgage borrower (mortgagor)’s equitable right of redemption, either by court order or by operation of law (after following a specific statutory procedure).

In Nigeria, mortgage lenders find it difficult to terminate a mortgage borrower (mortgagor)’s equitable right of redemption because of the challenges in the country’s judicial system. “We are challenged by the issue of foreclosure laws”, says Adeniyi Akinlusi, CEO, Trustbond Mortgage Bank, explaining that “there is no system in place to address that such that when you go to court, you spend donkey years there without making a headway”.

Akinlusi, who spoke in an interview with BusinessDay, added that mortgage operators were also challenged by the issue of recession. He explained that because of this, governments were not paying salaries and with that, those who have mortgage loans to pay are defaulting. “And those who are defaulting, you cannot tell their office because the fault is emanating from them.

All these are discouragement to the mortgage banks”, he stressed.

Continuing, he said, there are macro-economic issues such as inflation which is eating into the salaries of workers and even bank deposits; falling oil prices, depleting oil reserve, and falling value of the naira. All these are impacting on the value of properties and so when a new property is coming into the market, it will be coming at very high price and there is no increase in the salaries of workers to enable them to pay for the house”.

The CEO, whose company was able to record impressive financial performance in spite of the economic headwinds, noted that some of those challenges were macro while others were within their control like the foreclosure law which could be legislated upon by the state and national assembly so that people could start owning their homes.
“Until more Nigerians have their homes, it will be difficult to address the issue of economic empowerment because it will be easy to address this with people who have their own houses”, he reasoned, discloing that major stakeholders including the Nigerian Mortgage Refinance Company (NMRC), Federal Mortgage Bank of Nigeria (FMBN) and the Central Bank of Nigeria (CBN) were going round to the states, asking them to pass the foreclosure law in their various states. “When the law is passed, it will attract funding from the mortgage banks”, he hoped.
Akinlusi hopes that, by the first quarter of next year, it would have been clear which direction the government was going and the mortgage provider will be encouraged to give out loans believing that nobody will take out a loan and will not pay.

CHUKA UROKO